When Are Modifications of Securitized Loans Beneficial to Investors?

• 成果类型: Article
• 署名作者: Maturana, Gonzalo
• 署名单位: Emory University
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhx053
• 发表日期: 2017
• 页码: 3824
• 关键词: mortgage; RENEGOTIATION; instruments; default; prices; POLICY; weak

摘要

Loan modification is widely discussed as an alternative to foreclosure, but little research has focused on quantifying its effect on loan performance. I quantify this effect early in the housing crisis by exploiting exogenous variation in the incentives to modify securitized nonagency loans. An additional modification reduces loan losses by 35.8% relative to the average loss; this reduction suggests that the marginal benefit of modification likely exceeded the marginal cost. Consistent with the idea that high-income borrowers may be better equipped to withstand bad economic times, I find that modifications are especially beneficial when borrowers have larger loans.